1. Greg Young Aditya Mehta Eric Garcia 5/24/20151California Lutheran University: School of Business

2.  To gain an understanding of the true costs of the Iraq War to the United States through the framework of an economist.  Develop a respectable value for budgetary costs.  Define and put a monetary value on the Social Costs.  Macroeconomic costs- Oil, Interest on Debt, etc.  Develop an understanding of what the United States is giving up by pursuing war in Iraq.  Expenditure Switching. 5/24/20152California Lutheran University: School of Business

3.  What does the war mean to an average American Citizen.  Is there relief in sight based on the next presidential election.  The United States dealings with other foreign nations. (Trade and Security Issues)  Budget Deficit 5/24/2015California Lutheran University: School of Business3

4.  Spending to date – $646 billion, Congressional Budget Office  Total estimated spending thru 2017  Best case $1.7 trillion.  More probable $2.7 trillion. Congressional Research Service estimate 5/24/20154California Lutheran University: School of Business

5. Estimates in Percentage change per year. Source: CRS report for Congress, updated February 8 th 2008 5/24/20155California Lutheran University: School of Business

6.  The monthly “burn rate” or the war has been rising  4.4 billion in 2003  8 billion in 2006  12 billion in 2007  to an estimated 16 billion in 2008 5/24/2015California Lutheran University: School of Business6

7.  Conservative estimate 521 billion  Realistic moderate estimate 913 billion 5/24/2015California Lutheran University: School of Business7

8.  Conservative estimate 132 billion  Realistic moderate estimate 404 billion 5/24/2015California Lutheran University: School of Business8  Sunk costs ?

9.  Increasing demand for VA support Source: U.S. House of representatives budget committee, based on U.S. department of veterans affairs. 5/24/20159California Lutheran University: School of Business

10.  Best case $422 billion  Long-term $717 billion  31% of soldiers who have returned filed disability claims and expected to increase  Corporations are required to put money away, why shouldn’t the government? 5/24/201510California Lutheran University: School of Business

11.  We face a rapidly rising monthly cost to fund the war currently over 12 billion/month.  Estimated 16 billion/month in 2008  Better estimates will follow upcoming presidential election 5/24/201511California Lutheran University: School of Business

12.  Obama: Bring home 2 regiments of troops per month.  All combat brigades home within 18 months  Cease building of permanent bases  Protect embassy and diplomats  Keep selected troops in Iraq to carry out targeted strikes on al Qaeda  Aggressive diplomatic efforts will be made.  Provide at least $2 billion to expand services to Iraqi refugees. http://www.barackobama.com/issues/iraq/ 5/24/201512California Lutheran University: School of Business

13.  Phased Redeployment.  draw up a clear, viable plan to bring our troops home starting with the first 60 days of office  provide the highest quality health care  Securing Stability  American aid efforts  direct aid to the Iraqi people  Diplomatic Initiative  regional stabilization group  develop and implement a strategy to stabilize Iraq http://www.hillaryclinton.com/issues/iraq/ 5/24/201513California Lutheran University: School of Business

14.  Bolster Troops on the Ground  Greater military commitment is necessary to achieve long-term success in Iraq  Implement New Counterinsurgency Strategy  More robust counterinsurgency strategy  American forces must clear areas occupied by insurgents, stay, and hold these areas  Strengthen the Iraqi Armed Forces and Police  accelerate training and equipping of Iraqi armed forces http://www.johnmccain.com/Informing/Issues/fdeb03a7-30b0-4ece-8e34-4c7ea83f11d8.htm 5/24/201514California Lutheran University: School of Business

15. 5/24/201515California Lutheran University: School of Business

16.  Increased Recruitment Benefits - New sign up bonus $50000 - Illegal immigrants sign up; $20000 quick ship bonus. citizenship for members of immediate family.  Increased Reenlistment Benefits  -Experienced military personnel get up to $150000 for reenlistment. 5/24/201516California Lutheran University: School of Business

17. 5/24/201517California Lutheran University: School of Business Budgetary and Social Economic Costs Total Operations to Day$646 (Spent to date) Future Operations$521$913 (Future Operations only) Future Veterans' Costs$422$717 (Hidden Medical+ Veterans Disability + Veterans Sosical Security) Other Military Costs/Adjustments$132$404 (Hidden Defence + Future Defence reset + Demobilization, less no-fly-zone savings) Total Budgetary Costs$1,721$2,680 Social Costs Total$295$415 Total Budgetary and Social Costs$2,016$3,095 Total Budetary, social, and$2,203$4,995 Macroeconomic Costs (Without Interest) Interest costs$613$816 Total (With Interest)$2,816 $5,811

18.  US indebtedness at end of 2008 excess of $900 billion  Including cumulative interest on the debt- financed war borrowing, exceeds $1.1 trillion 5/24/201518California Lutheran University: School of Business

19.  3,988 US soldiers have been killed in combat  Government pays $500,000 to families (death benefit + life insurance)  Value of a Statistical Life (VSL) $7.2 million  Rough estimate of loss to U.S. economy is $28 billion due to loss of labor resource 5/24/201519California Lutheran University: School of Business

20.  29,395 soldiers have been injured  Value of Statistical Injury (VSI) – lost to the economy $6.1 million each 5/24/201520California Lutheran University: School of Business

21.  Going through equipment six to ten times faster than normal peacetime rate.  $250-375 billion to rebuild the entire armed services  404 Billion - Stiglitz 5/24/201521California Lutheran University: School of Business

22.  Adverse effects  Higher oil prices  Growing deficits  Expenditure switching towards Iraq  Supply-side effects of lost resources  Iraq war expenditures crowd out government investments. 5/24/201522California Lutheran University: School of Business

23.  Individuals are risk aversive  9/11  Safety  Trade barriers 5/24/201523California Lutheran University: School of Business

24. © 2008 Organization of the Petroleum Exporting Countries Yearly Basket Price 199516.86 199620.29 199718.68 199812.28 199917.48 200027.6 200123.12 200224.36 200328.1 200436.05 200550.64 200661.08 200769.08 200892.15 A significant proportion of the increase in the price of oil resulted from the war 5/24/201524California Lutheran University: School of Business

25.  A realistic moderate estimate assumes that $10 per barrel is the price increase due to the war & and the duration of these high oil prices is 8 years.  The U.S. imports around 5 billion barrels a year.  A $10 per barrel increase translates into an extra expenditure of $50 billion per year.  Over the 8 years projected in the realistic moderate estimate, that is $400 billion extra expenditure on oil imports. 5/24/201525California Lutheran University: School of Business

26.  Spending $50 billion more on oil every year leads to a reduction in American GDP & incomes.  The extent to which a change in oil imports translates into a change in total output is the oil import multiplier.  The realistic moderate estimate uses a multiplier of 2  GDP has gone down $50 billion x 2 or $100 billion, for 8 years – and we arrive at a total estimated reduction in GDP of $800 billion 5/24/201526California Lutheran University: School of Business

27.  Increased government spending of say $1 million, increases national output by an amount greater than $1 million, by a factor which is called the expenditure multiplier.  Multipliers used to measure the effect of spending on GDP differ according to the type of spending.  In a realistic moderate estimate we use a multiplier of 0.4  Switching just $800 billion over the 15 years we project we will be engaged in Iraq, to domestic investment would result in an increased GDP of $800 billion x 0.4 or $320 billion 5/24/201527California Lutheran University: School of Business

28.  No fly zone no longer enforced  Money to be spent on schools, transportation going to war 5/24/201528California Lutheran University: School of Business Alternative Ways to Spend the $432 Million We Spend In Iraq Every Day CurrentPotential EnrollmentEnrolemnt Per Year People Insured through SCHIP6,400,000 513,000 Head Start Participants909,200 58,000 Pell Grants 5,000,000 163,700 Border Patrol Agents12,300 10,700 State and Local Police580,700 14,200 Teachers 6,800,000 9,300

29. Cost in Billions Best CaseRealistic- Moderate Macroeconomic Costs Oil Price Impact $187 $800 Budgetary Impact $0 $1,100 Subtotal Macro Economic Costs $187 $1,900 5/24/201529California Lutheran University: School of Business

30.  Best case $1.7 trillion  More probable $2.7 trillion  Health Care: Long-term $717 billion  Demobilization: $12 Billion per month  Future Operations: $717 Billion  U.S. Debt after 2008: reaching $900 billion 5/24/201530California Lutheran University: School of Business

31.  Costs of planning war  All costs borne by other countries, including Iraq  All costs of increased insecurity  Consequences of Loss of credibility  Value of reduced capability of responding to national security threats elsewhere in the world  Value of reduced capability of responding to domestic situations (Hurricane Katrina) 5/24/201531California Lutheran University: School of Business

32.  http://www.hillaryclinton.com/issues/iraq/  http://www.barackobama.com/issues/iraq/  http://www.johnmccain.com/Informing/Issues/  Stiglitz, Joseph, and Bilmes, Linda. The Three Trillion Dollar War. New York London: W.W. Norton & Company, 2008.  Organization of the Petroleum Exporting Countries, 2008  Wallsten, Scott. “The economic cost of War in Iraq”. AEI Brookings Joint Center for Regulatory Studies, “2005”  Congressional Budget Office, http://www.cbo.gov 5/24/201532California Lutheran University: School of Business